Homebase is currently testing concepts for new openings and refits, where furniture and furnishings are playing an increasingly major role. So far the pilot stores have brought significant sales increases under difficult market conditions

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Homebase, the British DIY retailer, intends to continue to grow. The group's plan is for 10 to 15 new store openings every year. It had a total of 340 stores at the beginning of February 2008, 179 of them with a mezzanine floor. The expectation is for around 400 stores to be in operation by 2013, 240 with a mezzanine floor.

New stores in smaller format

The majority of new openings will be working on a smaller area than previously. They will feature an interior floorspace of 1 800 - 2 300 m² plus mezzanine and garden centre of around 900 m² each. The fact that the area is about 20 per cent smaller than in existing stores does not mean that the range of products stocked will be less complete. This new format is being targeted at smaller catchment areas "which cannot be reached with other retail formats", according to Paul Loft, managing director of Homebase, during a presentation to representatives of Deutsche Bank in early February.
"Reducing the area in the DIY section allows us to present our full range on a smaller footprint. The area for "hard" DIY categories such as hand tools, plumbing and wood is 20 per cent smaller, but it still achieves 95 per cent of sales:"
The area for "softer" categories such as decorative fittings, radiator cabinets, etc, has remained unchanged or been enlarged; it has also been moved to the front of the DIY section. More space has also been given to non-DIY products such as tiling or flooring, etc.

Refits bring sales uplift

Homebase is working on new concepts not only for new openings. Since 2006 there have been refit trials at ten existing outlets in the search for new solutions. In these stores, too, there is a greater focus on the theme of furniture and furnishings. More space has been allocated to displays of kitchens, bathrooms and furniture, as well as tiling and flooring, while the area taken up by the core DIY range has been reduced. These changes seem to be paying off: according to Paul Loft, sales increases of around 15 per cent have been recorded in these refitted stores.
Another 70 stores have already been identified for such refits. Paul Loft estimates the volume of investment at £ 300 000 - 700 000 (€ 383 000 - 894 000), with the expectation of sales growth of 10 - 15 per cent.
The 27 stores taken over from Focus DIY in October 2007, which also need to be integrated, are to be altered according to the new concept. The acquisition of these stores means that Homebase is able to expand both retail space and sales by six per cent at a stroke.

In a difficult environment

As Paul Loft acknowledges, even if Homebase does implement promising reforms, things will not get easier for DIY retailers in the British DIY market in the foreseeable future. Homebase figures for the 2007/08 business year (to 1 March 2008) show just how challenging that situation is already. Sales were 1.6 per cent down to £ 1.569 bn (€ 2.004 bn), and 4.1 per cent in like-for-like terms. The trading result declined, in spite of the optimisation of procurement and supply chain systems, by 16 per cent to £ 45.1 mio (€ 57.6 mio).
Meanwhile direct imports, more than half of which are sourced directly from the manufacturer, now account for 28 per cent of sales. The company hopes that this strategy will result in increasing the gross profit margin by 100 basing points in each of the next two years, which will however depend on the way the exchange rates develop as well.
Information from the company shows that kitchens sold extremely well last year, a fact that reflects the nationwide expansion of its installation service. The process of editing the product categories also brought good results for housewares, including textiles, the kitchen shop and accessories.
Homebase is complementing the range of furnishings in its stores with a 232-page furniture catalogue featuring 1 500 furniture series and 800 home accessories. This utilises the influence and know-how of furnishing specialists Argos, Homebase's partner in the Home Retail Group, which recorded sales of just under £ 6 bn (€ 7.7 bn) in the recently completed financial year.
At the end of that year Homebase had a total of 331 stores with a combined sales area of 1.43 mio m². In 181 stores there were mezzanine floors totalling 177 000 m², and the garden centres accounted for around 326 000 m².